Current Account Deficit Smallest in Four Years

The U.S. current account deficit narrowed in the July-September quarter to the lowest level in four years as a rise in Americans' foreign investment earnings helped offset a bigger deficit in goods.

The deficit in the current account declined to $94.8 billion in the third quarter, the Commerce Department reported Tuesday. It was the smallest imbalance since the third quarter of 2009 when the country was climbing out of a deep recession. The deficit was 1.8 percent lower than a revised $96.6 billion deficit in the April-June quarter.

The current account is the country's broadest trade measure covering not only goods and services but also investment flows.

For the third quarter, the deficit in goods increased by 1.7 percent but this was offset by a 7.1 percent rise in investment earnings.

A smaller trade deficit usually means that U.S. companies are producing more to meet domestic and overseas demand.

Goods exports did rise in the third quarter, reflecting a boom in energy production in America which has lifted U.S. energy exports to record highs. But imports were up by a larger amount, led by a big increase in shipments of foreign-made autos. Oil imports also rose during the quarter.

The surplus in services rose 0.5 percent, reflecting increases in travel and in royalty payments.

The big rise in investment income reflected gains in interest payments and stock dividends paid to Americans on their foreign holdings.

The various changes left the current account deficit at 2.2 percent of the total economy, down from 2.3 percent in the second quarter. It was the smallest percentage since the deficit stood at 2 percent of the overall economy in the first quarter of 1998.

The overall economy grew at an annual rate of 3.6 percent in the July-September quarter. Much of that strength came from a buildup in business stockpiles.

Companies could slow their inventory growth in the October-December quarter if they don't see enough demand from consumers. That would weigh on overall economic growth.

Many economists are predicting growth will slow to an annual rate of between 2 percent and 2.5 percent.

Still, a recent government report showed restocking rose in October at the fastest pace in nine months. At the same time, consumers stepped up spending at retail businesses in November. If those trends continue, growth could be stronger.